A number of writings have recently appeared with the thesis that the announced plans of the Iranian government to
institute a Tehran oil bourse, perhaps as early as this month, is the real hidden reason behind the evident march to war on Iran by the Anglo-American powers. The thesis is simply wrong for
many reasons, not least that war on Iran has been in planning since the 1990s as an integral part of the United States' Greater Middle East strategy.

More significant, the oil-bourse argument is a red herring that
diverts attention from the real geopolitical grounds behind the march toward war that have been detailed on this website, including in my piece, A high-risk game of nuclear chicken, which appeared in Asia Times Online on January 31.

In 1996, Richard Perle and Douglas Feith, two neo
-conservatives later to play an important role in formulation of Bush administration's Pentagon policy in the Middle East, authored a paper for then newly elected Israeli prime minister
Benjamin Netanyahu. That advisory paper, "A Clean Break: A New Strategy for Securing the Realm", called on Netanyahu to make a "clean break from the peace process". Perle and Feith
also called on Netanyahu to strengthen Israel's defenses against Syria and Iraq, and to go after Iran as the prop of Syria.

More than a year before President George W Bush declared his
"shock and awe" operation against Iraq, he made his now-infamous January 2002 State of the Union address to Congress in which he labeled Iran, along with Iraq and North
Korea, as a member of the "axis of evil" trio. This was well before anyone in Tehran was even considering establishing an oil bourse to trade oil in various currencies.

The argument by those who believe the Tehran oil bourse
would be the casus belli, the trigger pushing Washington down the road to potential thermonuclear annihilation of Iran, seems to rest on the claim that by openly trading oil to other nations
or buyers in euros, Tehran would set into motion a chain of events in which nation after nation, buyer after buyer, would line up to buy oil no longer in US dollars but in euros. That, in
turn, goes the argument, would lead to a panic selling of dollars on world foreign-exchange markets and a collapse of the role of the dollar as reserve currency, one of the "pillars of
Empire". Basta! There goes the American Century down the tubes with the onset of the Tehran oil bourse.

Some background considerations

That argument fails to convince for a number of reasons. First
, in the case of at least one of the oil-bourse theorists, the argument is based on a misunderstanding of the process I described in my book, A Century of War, regarding the creation
in 1974 of "petrodollar recycling", a process with which then-US secretary of state Henry Kissinger was deeply involved, in the wake of the 400% oil-price hike orchestrated by the
Organization of Petroleum Exporting Countries (OPEC).

The US dollar then did not become a "petrodollar", although
Kissinger spoke about the process of "recycling petrodollars". What he was referring to was the initiation of a new phase of US global hegemony in which the petrodollar export earnings of
OPEC oil lands would be recycled into the hands of the major New York and London banks and re-lent in the form of US dollar loans to oil-deficit countries such as Brazil and Argentina,
creating what soon came to be known as the Latin American debt crisis.

The dollar at that time had been a fiat currency since August
1971 when president Richard Nixon first abrogated the Bretton Woods Treaty and refused to redeem US dollars held by foreign central banks for gold bullion. The dollar floated against other
major currencies, falling more or less until it was revived by the 1973-74 oil-price shock.

What the oil shock achieved for the sagging dollar was a
sudden injection of global demand from nations confronted with 400% higher oil-import bills. At that time, by postwar convention and convenience, as the dollar was the only reserve currency held around the world other than gold, oil was
priced by all OPEC members in dollars as a practical exigency.

With the 400% price rise, nations such as France, Germany
and Japan suddenly found reason to try to buy their oil directly in their own currencies - French francs, Deutschmarks or Japanese yen - to lessen the pressure on their rapidly declining
reserves of trade dollars. The US Treasury and the Pentagon made certain that did not happen, partly with some secret diplomacy by Kissinger, bullying threats, and a whopping-big US
military agreement with the key OPEC producer, Saudi Arabia. At that time it helped that the shah of Iran was seen in Washington to be a vassal of Kissinger.

The point was not that the US dollar became a "petro"
currency. The point was that the reserve status of the dollar, now a paper currency, was bolstered by the 400% increase in world demand for dollars to buy oil. But that was only a part of
the dollar story. In 1979, after the accession to power of the ayatollah Ruhollah Khomeini in Iran, oil prices shot through the roof for the second time in six years. Yet, paradoxically, later
that year the dollar began a precipitous free-fall, not a rise. It was no "petrodollar".

Foreign dollar-holders began dumping their dollars as a protest
against the foreign policies of the administration of US president Jimmy Carter. It was to deal with that dollar crisis that Carter was forced to bring in Paul Volcker to head the Federal Reserve in 1979. In October 1979 Volcker gave the
dollar another turbocharge by allowing interest rates in the US to rise some 300% in weeks, to well over 20%. That in turn forced global interest rates through the roof, triggered a global
recession, mass unemployment and misery. It also "saved" the dollar as sole reserve currency. The dollar was not a "petrodollar". It was the currency of issue of the greatest
superpower, a superpower determined to do what it needed to keep it that way.

The F-16 dollar backing

Since 1979 the US power establishment, from Wall Street to
Washington, has maintained the status of the dollar as unchallenged global reserve currency. That role, however, is not a purely economic one. Reserve-currency status is an adjunct of global power, of the US determination to dominate
other nations and the global economic process. The United States didn't get reserve-currency status by a democratic vote of world central banks, nor did the British Empire in the 19th century. They fought wars for it.

For that reason, the status of the dollar as reserve currency
depends on the status of the United States as the world's unchallenged military superpower. In a sense, since August 1971 the dollar is no longer backed by gold. Instead, it is backed by F-16s and Abrams battle tanks, operating in some
130 US bases around the world, defending liberty and the dollar.

A euro challenge?

For the euro to begin to challenge the reserve role of the US
dollar, a virtual revolution in policy would have to take place in Euroland. First the European Central Bank (ECB), the institutionalized, undemocratic institution created by the Maastricht Treaty to maintain the power of creditor banks in
collecting their debts, would have to surrender power to elected legislators. It would then have to turn on the printing presses and print euros like there was no tomorrow. That is because the size of the publicly traded Euroland government
-bond market is still tiny in comparison with the huge US Treasury market.

As Michael Hudson explains in his brilliant and too-little
-studied work Super Imperialism, the perverse genius of the US global dollar hegemony was the realization, in the months after August 1971, that US power under a fiat dollar system was
directly tied to the creation of dollar debt. The US debt and the trade deficit were not the "problem", they realized. They were the "solution".

The US could print endless quantities of dollars to pay for
foreign imports of Toyotas, Hondas, BMWs or other goods in a system in which the trading partners of the United States, holding paper dollars for their exports, feared a dollar collapse enough to continue to support the dollar by buying US
Treasury bonds and bills. In fact in the 30 years since abandoning gold exchange for paper dollars, the US dollars in reserve have risen by a whopping 2,500%, and the amount grows at double-digit rates today.

This system continued into the 1980s and 1990s unchallenged
. US policy was one of crisis management coupled with skillful and coordinated projection of US military power. Japan in the 1980s, fearful of antagonizing its US nuclear-umbrella provider,
bought endless volumes of US Treasury debt even though it lost a king's ransom in the process. It was a political, not an investment, decision.

The only potential challenge to the reserve role of the dollar
came in the late 1990s with the European Union decision to create a single currency, the euro, to be administered by single central bank, the ECB. Europe appeared to be emerging as a
unified, independent policy voice of what French President Jacques Chirac then called a multipolar world. Those multipolar illusions vanished with the unpublicized decision of the ECB and
national central banks not to pool their gold reserves as backing for the new euro. That decision not to use gold as backing came amid a heated controversy over Nazi gold and alleged wartime abuses by Germany, Switzerland, France and
other European countries.

Since the shocks of September 11, 2001, and the ensuing
declaration of a US "global war on terror", including a unilateral decision to ignore the United Nations and the community of nations and go to war against a defenseless Iraq, few
countries have even dared to challenge dollar hegemony. The combined defense spending of all nations of the EU today pales by comparison with the total of current US budgeted and
unbudgeted military spending. US defense outlays will reach an official, staggering level of US$663 billion in the 2007 fiscal year. The combined annual EU spending amounts to a mere $75
billion, and is tending to decline, in part because of ECB Maastricht deficit pressures on its governments.

So today, at least for the present, there are no signs of
Japanese, EU or other dollar holders engaging in dollar-asset liquidation. Even China, unhappy as it is with Washington's bully politics, seems reluctant to rouse the American dragon to fury.

The origins of the oil bourse

The idea of creating a new trading platform in Iran to trade oil
and to create a new crude-oil benchmark apparently originated with the former director of the London International Petroleum Exchange, Chris Cook. In a January 21 article in Asia Times
Online (What the Iran 'nuclear issue' is really about), Cook explained the background. Describing a letter he had written in 2001 to the governor of the Iranian Central Bank, Dr Mohsen Nourbakhsh, Cook explained what he advised then:

In this letter I pointed out that the structure of global oil
markets massively favors intermediary traders and particularly investment banks, and that both consumers and producers such as Iran are adversely affected by this. I recommended that Iran consider as a matter of urgency the creation of a
Middle Eastern energy exchange, and particularly a new Persian Gulf benchmark oil price.

It is therefore with wry amusement that I have seen a myth
being widely propagated on the Internet that the genesis of this "Iran bourse" project is a wish to subvert the US dollar by denominating oil pricing in euros.

As anyone familiar with the Organization of Petroleum
Exporting Countries will know, the denomination of oil sales in currencies other than the dollar is not a new subject, and as anyone familiar with economics will tell you, the denomination
of oil sales is merely a transactional issue: what matters is in what assets (or, in the case of the United States, liabilities ) these proceeds are then invested.

A full challenge to the domination of the US dollar as the world
central-bank reserve currency entails a de facto declaration of war on the "full-spectrum dominance" of the United States today. The mighty members of the European Central Bank
Council well know this. The heads of state of every EU country know this. The Chinese leadership as well as the Japanese and Indians know this. So does Russian President Vladimir Putin.

Until some combination of those Eurasian powers congeal in a
cohesive challenge to the unbridled domination of the United States as sole superpower, there will be no euro or yen or even Chinese yuan challenging the role of the dollar. The issue
is of enormous importance, as it is vital to understand the true dynamics bringing the world to the brink of possible nuclear catastrophe today.

As a small ending note, a good friend in Oslo recently
forwarded me an article from the Norwegian press. At the end of December, Sven Arild Andersen, director of the Oslo bourse, announced he was fed up with depending on the London oil
bourse trading oil in dollars. Norway, a major oil producer, selling most of its oil into euro countries in the EU, he said, should set up its own oil bourse and trade its oil in euros. Will
Norway - a member of the North Atlantic Treaty Organization - become the next target for the wrath of the Pentagon?